Schrodinger's Catastrophe Redux: Trumpcare would destroy the Individual Market next year...

Late last night, just a few hours ahead of the actual vote in the House of Representatives, the House GOP released their final changes to the American Health Care Act (AHCA), otherwise known as Trumpcare. The last-minute changes range from pointless to insulting to disastrous:

• It tacks on an additional one-time $15 billion to the "State Stability Fund", supposedly to cover maternity, newborn care and mental health services.

• It pays for the above by holding onto the existing 0.9% Medicare tax on people earning over $200,000 for another 6 years

• And, most significantly, it would get rid of the requirement that all qualifying healthcare policies cover the 10 Essential Health Benefits mandated by the federal government.

I want to take a moment to address the first two bullet points above, because they're basically the exact same thing that Paul Ryan did a few days earlier.

The original version of the AHCA would have resulted in older Americans having to pay exhorbitant premiums due to the idiotic restructuring of the tax credit system and the 5:1 age band change. This led the AARP to unleash their army to understandable scream bloody murder at Congressional town halls nationwide.

In response, the GOP added an oddly-worded amendment which "instructed" the Senate to pony up $85 billion which would be used to "increase tax credits for 50-64 year olds" in some vague fashion. Why they didn't simply cross out "$4,000" and replace it with "$10,000" in the language of their own text I have no idea, but whatever. The point is that they gummed up the works for older enrollees, got screamed at for it, and responded by throwing a boatload of cash at those folks to get them to STFU.

Well, the maternity/mental health/extended Medicare tax items above seem to be the exact same thinking:

$15B more for mental/maternity...which the plans themselves don't cover...paid for by tax which was already there. Which defeats the point. https://t.co/By6TSmsB7Z

— ☪️ Charles Gaba ✡️ (@charles_gaba) March 24, 2017

Basically, "women & mental health workers screaming at us about killing EHBs, so throw $15B at them to shut them up." Same as $85B for AARP.

— ☪️ Charles Gaba ✡️ (@charles_gaba) March 24, 2017

So they picked the two EHBs which people were bitching about the loudest and threw some one-time cash at those, still dropping all EHBs.

— ☪️ Charles Gaba ✡️ (@charles_gaba) March 24, 2017

Also note the amazing disappearing, reappearing ACA taxes. First they were gonna kill ALL ACA taxes and tax ESI employees at 90%...

— ☪️ Charles Gaba ✡️ (@charles_gaba) March 24, 2017

Then everyone screamed so they scrapped that but brought back Cadillac...but not until 2025...and kept other ACA taxes for 1 year...

— ☪️ Charles Gaba ✡️ (@charles_gaba) March 24, 2017

...then they scrapped all taxes THIS year and bumped Cadillac until 2026...

— ☪️ Charles Gaba ✡️ (@charles_gaba) March 24, 2017

...while lowering med expense tax deductions to pay for AARP payoff...

— ☪️ Charles Gaba ✡️ (@charles_gaba) March 24, 2017

...and now they're bringing BACK the Medicare 0.9% to pay for maternity/mental health payoff. Insanity.

— ☪️ Charles Gaba ✡️ (@charles_gaba) March 24, 2017

Tell you one thing: if I'm an insurance CEO watching this chaos, how likely am I to commit to 2018 REGARDLESS of what they end up doing?

— ☪️ Charles Gaba ✡️ (@charles_gaba) March 24, 2017

I'll come back to this last point in a bit, but let's move onto the EHB thing. Over at The Incidental Economist, Nicholas Bagley points out that, as ugly as the EHB repeal is on the face of it (it effectively turns the decision about what Health Benefits are deemed Essential over to the states instead of HHS), it's actually far worse than that.

On the surface, this change would appear to be No Big Deal for progressive states like Massachusetts, California and Vermont, which presumably would make sure that their EHB requirements are as comprehensive as possible...but an utter disaster for states like Oklahoma, Alabama and Texas, which presumably wouldn't require "healthcare policies" to cover more than Band-Aids and Tylenol.

HOWEVER, according to Bagley, the actual language of the amendment itself would be even more of a disaster:

The problem runs deeper. Section 36B governs eligibility for tax credits; among other things, you’re eligible only if you buy a qualified health plan that covers the essential health benefits. In 2018 and beyond, then, it looks like you’re eligible for tax credits only if you buy a health plan that adheres to state-defined essential health benefits.

So—in a weird echo of the argument in King v. Burwell—if a state hasn’t defined the essential health benefits, it seems that no one in the state is eligible for tax credits. If that’s right, then the best way to read the manager’s amendment may be the same way that Republicans in King argued the ACA should be read: as dangling tax credits to induce states to do what Congress couldn’t order them to do directly.

...Which brings me to the next big ambiguity. The manager’s amendment retains almost the entirety of the ACA’s rule governing the essential health benefits. The Secretary of HHS is still required to “define the essential health benefits,” which must include the ten major benefit categories, including maternity care and mental health services. Plus, the Secretary must “ensure” that the scope of the essential health benefits is “equal to the scope of benefits provided under a typical employer plan.”

Bagley's point seems to be that, just as King v. Burwell ended up leaving millions of people's tax credits (and therefore their healthcare policies) dangling in legal limbo as the case wound its way through the court system for years, it's very likely that the same would be the case here.

But let's back up a bit. Earlier, Bagley points out the obvious: The timing of this mess is also critically important:

State-defined benefits will then drive the size of the tax credits: the more expansive the benefits, the bigger the tax credit. Did House Republicans really want to give states an incentive to expand the definition of essential health benefits in order to draw down more federal dollars? As Tim Jost points out, this problem dissipates in 2020, when the tax credits will be fixed amounts that don’t turn on which benefits are essential. But the concern is very real for 2018 and 2019.

Even if you think that’s good policy, the manager’s amendment is troubling. Start with its irresponsibility. The new rule would apply as of January 1, 2018. But insurers have to create and price their health plans within the next few months in order to get them approved prior to the start of open enrollment. They don’t know which services their states will say are essential and they don’t have time to wait around while their states bicker about it.

It's very possible that in this scenario, many of the carriers would collectively throw their hands in the air and say "to hell with this...I'm out of here", and bail on the entire individual market. Not just the exchanges, mind you--it's my understanding that the wording of the Trumpcare bill would make tax credits available off-exchange as well...which not only would make the exchanges mostly meaningless, but also means that there'd be absolutely no way of separating your enrollee base out based on tax credit status (and of course, everyone below 960% FPL would qualify for tax credits anyway). This would leave the 2018 Individual Market a barren wasteland. Republicans are attacking the ACA for leaving 1/3 of counties with only one carrier on the exchanges today? How about 90% (?) not having any carriers on or off the exchanges?

(Side Note: Ironically, this is also one of the reasons I strongly support requiring ALL individual policies be sold ON the exchanges exclusively...to prevent carriers from cherry-picking their indy plan enrollees based on income).

OK, so that's the "Damned If You Do" scenario. What about the flip side: What happens if the AHCA bill fails (either in the House today, or in the Senate assuming it manages to pass)?

Trump declared just last night that if it fails today, he's gonna stick with the ACA after all and be done with repeal/replace. Granted, his word doesn't mean much, but really, with the clock ticking, this probably really is their last shot at a major overhaul/replacement before the 2018 season, right?

Well, here's the thing: The ACA marketplaces do have serious problems in some parts of the country.

Supporters of the law need to understand (and most do, but some may need reminding) that while the ACA overall is doing far better than the GOP keeps claiming, "far better" in no way means that all is well.

Some of the problems were inherent in the original law:

• The tax credits aren't generous enough.
• The tax credits are cut off at too low of an income threshold.
• The ESI "family glitch".
• The ESI "skinny plan glitch".
• The mandate penalty isn't large enough (yeah, this one will get tomatoes thrown at me, but it's true)

All of these are typical of any 1.0 version of major legislation, typically fixed in later modifications to the law. This happened with Social Security, Medicare and Medicaid in their early years, and should have been done with the ACA as well. The point is that these problems are all very much fixable.

Some of the problems were genuine screw-ups by the Obama Administration and/or HHS Dept. after the law was passed:

• The initial website launch tech debacle (which hurt enrollment/risk pool by pushing so many enrollees out until March/April 2014, causing confusion for actuaries trying to set 2015 rates)
• The "You Can Keep It" Transitional Plan waiver decision (which hurt the risk pool by allowing several million people to stick with noncompliant plans for years longer, which are part of a separate risk pool)

Neither of these are fixable today, but the damage from them is pretty much over at this point.

Other problems, however, were deliberate sabotage on the part of the Republican Party:

• First, of course, the fact that Congressional Republicans have refused to help fix any of the "original law" bullet points for seven years.

• Obstructing Navigators, confusing the public with nonsense about "death panels", refusing to provide accurate information (or any information at all) to potential enrollees about their options, etc etc.

• Flat-out lying to the public about "How many have PAAAAAID!!!", how many are newly enrolled, how much premiums have actually increased for most enrollees themselves, etc.

• THE RISK CORRIDOR MASSACRE, which helped wipe out over a dozen Co-Op start-ups, kicked 800,000 people off their policies, hurt competition and caused a domino effect of other carriers jacking up rates dramatically in many states

• The recent Trump HealthCare.Gov final week "Ad Kill" stunt, which likely hurt exchange enrollment to the tune of up to half a million people

• Back in December, a Republican healthcare lobbyist openly admitted that if they can't repeal the ACA, they'll simply try to claim it's already dead meat and blame the Democrats rather than actually try to improve it.

• On his very first day in office, Trump signed an executive order which basically ordered the HHS Dept. and other departments to do everything possible to weaken or sabotage the implementation of the ACA.

• A couple of weeks ago, Trump himself confirmed the GOP lobbyist's scheme by stating point-blank that "should the GOP health-care reform bill fail, he will let the Affordable Care Act (ACA) sputter and blame Democrats" rather than actually try to improve it.

So, you have a combination of all of the above, tremendous uncertainty and a ticking clock, and an administration which has already openly stated that they intend on sabotaging the law as much as possible.

If you're an insurance carrier CEO or board member, then assuming the individual market isn't a major part of your business...how likely are you to stick around next year regardless of whether the AHCA passes or not?